All Forum Posts by: Kate Johnston

Greatly appreciate hearing everyone's thoughts! Sounds like, all in all, we're expecting prices to hold and grow slowly but in general growth and returns will be modest and construction costs a big factor in ultimate returns. Still good pockets of opportunity if you know where to look and what to look for. So, pretty much a mildly sunny day. Nothing to be thrilled about but no concerning storm clouds either. 

I echo what everyone else has said about optimizing your cash flow. I also want to add that in deciding whether or not to take the HELOC you need to look at your worst case scenario and what runway you will have to get out if things don't go as planned. The way I would think about this is:

1) What is the cash flow potential of your Santa Rosa house? How does that cash flow compare to cost of upkeep plus payments on the original loan (I assume a mortgage)? How would the cash flow compare to the cost of upkeep + mortgage payments + HELOC payments?

2) If the cash flow is greater than upkeep + mortgage + HELOC, then great! Take out the HELOC and whatever you buy in Indiana, just make sure return will be higher than the HELOC interest rate. 

3) If the cash flow is less than upkeep + mortgage + HELOC, then what's your runway? Worst case scenario, assuming it takes a while to get new jobs, how much time do you have to get your new investments cash flowing enough to put you in the black over all? Make sure you identify when you would need to get out and put the house on the market to get out from under the debt before you miss payments and hurt your credit. Of course that's unlikely, but I thinks it's essential to always know your exit strategies.

Lastly a note on refinancing, look at all the financing options available first. Mortgages front-load the interest so you barely pay your principle for the first several years, and then you end up paying far more than the property was worth by the end of it. This makes them really awful deals when you look at them long term. 

I've recently seen a fair number of articles predicting the LA market is slowing down and is going to lag behind the national average in term of how fast prices will rise.  I'd love to hear the thoughts of fellow LA investors. What do you see and how are you adapting your investing strategies? 

I'm currently evaluating three different residential construction deals that look really good on paper, but I'm thinking about what waves to watch for in this ocean of ours, and would love to hear other perspectives.